The Royal Commission

and super

What you need to know

After almost a year of hearings and deliberations, the final report from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has now been released.

The report is a damning indictment on the banks and their super funds, financial advisers, insurance companies and mortgage brokers. The report contains 76 separate recommendations, 9 of which directly concern superannuation. 24 cases involving misconduct by the banks and other for-profit entities have been referred to the regulators for possible criminal or civil charges.

Commissioner Hayne observed that, in almost every case, misconduct was driven by businesses pursuing profit and individual greed. Providing service to customers came second.

A strong theme of the report is that regulators should do much more to enforce existing laws and take stronger action against profit-driven entities that put the interests of shareholders ahead of their members.

While both major political parties have agreed to take action on the vast majority the Commission’s recommendations it is important to remember that without legislation, these recommendations cannot be implemented.  As such, any impact of the Royal Commission recommendations on super fund members is some way off. Moreover, most of the recommendations will have minimal impact on our members. We have never paid commissions to financial advisers or used hawking to sell superannuation products.

Key recommendations concerning super and financial advice:

  • Banning the hawking of superannuation and insurance products
  • People should only have one default super fund
  • Financial advisers who are not independent must disclose this to clients in a prescribed format.
  • Grandfathered commissions – attached to some bank and insurance-owned super funds – to be banned.
  • Overhaul bosses pay so that incentives are more aligned to non-financial risk.
  • Overhaul the culture of the regulators

Background

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was established by the Government in December 2017, with the first of seven public hearings held in March 2018, and the final round held in November 2018.

During that time the Commission received more than 10,000 submissions from members of the public, the majority of them relating to past experiences with banks.


Source: Australian Institute of Superannuation Trustees (AIST)